Plot twists in selecting new CEO for Uber

Dara Khos
rowshahi, who has taken over as CEO of Uber, said at a staff meeting that the company could go public in as soon as 18 months.

Dara Khos
rowshahi, who has taken over as CEO of Uber, said at a staff meeting that the company could go public in as soon as 18 months.

Photo: Paul Sakuma / Paul Sakuma / Associated Press 2012

Photo: Paul Sakuma / Paul Sakuma / Associated Press 2012

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Dara Khos
rowshahi, who has taken over as CEO of Uber, said at a staff meeting that the company could go public in as soon as 18 months.

Dara Khos
rowshahi, who has taken over as CEO of Uber, said at a staff meeting that the company could go public in as soon as 18 months.

Photo: Paul Sakuma / Paul Sakuma / Associated Press 2012

Plot twists in selecting new CEO for Uber

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By last Friday afternoon, most of Uber’s eight directors had gathered in San Francisco for a board meeting. Their agenda was simple: Pick a CEO.

What unfolded over the next 72 hours was anything but straightforward.

In discussions at the Four Seasons Hotel downtown and at the offices of private equity firm TPG Capital, which holds an Uber board seat, directors operated under the cloak of secrecy. They spoke in a kind of code about some of the candidates, limiting knowledge of the shortlist to a handful of people.

By Sunday morning, one of the finalists, Jeffrey Immelt, the former General Electric chief, had publicly pulled out. Some board members were behind another finalist, Meg Whitman, CEO of Hewlett Packard Enterprise, and some people close to the process had taken steps to prepare for an announcement of her appointment.

But as Sunday wore on, Whitman, emboldened by her front-runner status, started negotiating for increasing control were she to accept the job, siding with one faction of the board that wanted to limit the clout of Travis Kalanick, the former chief. Those tactics deterred most board members, who then swung decisively in favor of Dara Khosrowshahi, chief executive of Expedia.

This account of the ride-hailing company’s CEO selection is based on interviews with more than a dozen people with knowledge of the board’s discussions, who spoke on the condition of anonymity because the deliberations were private. It illustrates the high-wire act of herding eight board members — many of whom have big personalities and some of whom are feuding with one another — toward consensus at the world’s most valuable privately held company.

It also gives a taste of the kinds of issues Khosrowshahi may have to navigate at Uber. In an interview at Expedia’s offices in Bellevue, Wash., Khosrowshahi said he was attracted to the Uber role because the company is “reinventing the transportation industry and is one of the most powerful brands in the world,” adding, “I’m excited to shape that unfinished story.” One of his priorities, he said, is helping employees get back “to running a company they can be proud of.”

That may be difficult given the numerous scandals that Uber has confronted this year, including a development that surfaced Tuesday: The Department of Justice is looking into whether Uber managers broke a federal law, the Foreign Corrupt Practices Act, which governs acts such as international bribery.

Uber confirmed that it is cooperating with the Justice Department’s preliminary review in the matter, which was reported earlier by the Wall Street Journal. The company declined to comment on its search for a CEO.

The process was already complicated leading up to last weekend. Since Kalanick resigned under pressure in June, the company’s board had worked to put together a list of potential recruits with Heidrick & Struggles, the executive search firm. Over two months, that list was whittled down to three candidates.

Whitman, a veteran of the tech industry who had led multiple public companies, quickly became a favorite candidate of Benchmark, one of Uber’s largest investors, which also has a board seat. Whitman, who was steering Hewlett Packard Enterprise through a challenging landscape for corporate technology, was intrigued by the possibility of leading a turnaround at Uber.

But in July, she publicly denied she wanted the Uber job in a series of tweets, taking herself out of consideration. Board members had all but written her off until recently, when Ryan Graves, an Uber director and early employee, coaxed Whitman to return to the process.

Immelt, who was on the verge of leaving GE, was favored by Kalanick and a few other directors for his depth of experience running a public company. Khosrowshahi, the long-shot candidate, also gained favor with some directors.

On Friday, Immelt and Khosrowshahi made the trip to downtown San Francisco for the last leg of the selection. In an airy conference room on the 33rd floor of TPG’s offices, the two candidates presented their visions for the future of Uber. Whitman met with some board members the next day at the Four Seasons Hotel, changing locations as a way to throw people watchers off the trail.

After the presentations, some board members grew concerned about Immelt. They questioned the success of his tenure at GE, while others — particularly Benchmark — worried that he would serve only as a surrogate for Kalanick. And while Immelt had experience with large organizations, some board members felt he lacked the technical and strategic prowess to run Uber.

Immelt withdrew from the process Sunday morning with a post on Twitter.

At the same time, Khosrowshahi continued to present himself as a low-key and steady hand. The fact that he was not publicly campaigning for the job — his name had not surfaced in the media — helped his cause.

Khosrowshahi said of the recruitment process: “When I was at Uber, they asked me if I knew my passenger rating.”

Whitman also had many positives in her favor. Benchmark liked her track record of imposing order on a company, along with her no-nonsense approach to governance.

Yet others, like Kalanick, were wary. Kalanick viewed Whitman as potentially compromised by her strong affiliation with Benchmark, which had sued Kalanick for board control. A Delaware judge said Wednesday that the case can go to arbitration.

Some of Whitman’s points to board members did echo Benchmark’s. At one point, she suggested to Uber directors that it would behoove the company to box out Kalanick.

Throughout the recruitment, directors had agreed to pick their first- and second-choice candidates. While many leaned toward Whitman as a first choice, all of the directors continued including Khosrowshahi in their selections. Still, Whitman appeared to have an edge.

After Immelt dropped out Sunday morning, things changed. Whitman, as the front-runner, negotiated for conditions including limiting Kalanick and potentially reshaping the board of directors. She also wanted an end to the lawsuit between Kalanick and Benchmark.

“I said Benchmark and Travis needed to settle their lawsuits and the board needed to put in place a functioning governance structure,” Whitman said in a statement Tuesday to the New York Times.

She added that “the directors, including Travis, seemed eager to take those steps on Saturday and Sunday morning, but by midday Sunday, it was becoming clear that the board was still too fractured to make progress on the issues that were important to me.”

Directors were put off by Whitman’s tactics. A consensus grew among Uber board members that Khosrowshahi was a stronger candidate who came with fewer potential headaches.

By Sunday evening, that conclusion had hardened into a unanimous vote for Khosrowshahi.

The board also agreed to hold the news until it had time to formally offer Khosrowshahi the job and tell Uber employees that he had accepted. After months of turmoil surrounding the company, it was the least directors could do to instill confidence among the rank and file.

Minutes later, news of the board’s decision leaked.

On Wednesday, Khosrowshahi told Uber’s 16,000 employees that the company could go public in as soon as 18 months, according to an employee who attended the meeting.

Khosrowshahi wasn’t definitive, the person said. In a meeting that was broadcast from San Francisco across the world, Khosrowshahi appeared to be trying to allay one of the biggest concerns not only for investors but also for employees. With a $69 billion valuation by private investors, funders have grown frustrated by the lack of timeline for getting their payouts. Employees have also felt pent up, as many are compensated with options.

The Associated Press and the Washington Post contributed to this report.